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Tutorial: Government Bonds

What are government bonds?

Government bonds are medium- to long-term debentures issued by the public sector. The Federation, the provinces, and the municipalities use government bonds to finance long-term state infrastructure projects such as road and rail construction, education, and the healthcare system.

How do government bonds work?

Government bonds are primarily issued in the form of fixed-rate securities. Their coupon is usually paid once a year. At the end of maturity, the bond is redeemed at nominal value. This means that income and payment dates are scheduled.

Your benefits

Government bonds are an attractive long-term investment opportunity with limited risk. They are suitable for conservative investors who look for safe forms of investments.

Your advantages

  • You benefit from attractive interest payments throughout the entire term of the bond. The amounts and the payment dates are fixed in advance.

Details you should be aware of

  • Between issue date and maturity, price fluctuations are possible, which means that the sale of the bond prior to maturity may result in a loss.
  • The 100% capital redemption only applies to the end of maturity.

How do government bonds react to…

… rising interest rates?
Government bonds with fixed interest rates fall when interest rates are generally rising. If you sell your bonds prior to maturity, you may record a loss.

… stable interest rates?
In the case of stable interest rates, the price of government bonds does not change.

… falling interest rates?
Government bonds with fixed interest rates increase when interest rates are generally falling. If you sell your bonds prior to maturity, you may record a profit.


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